AN ACT ESTABLISHING REFORMS IN THE REGULATION OF RENT OF CERTAIN RESIDENTIAL UNITS

Case Overview and Summary

Summary of the Rent Control Act of 2005 (Republic Act No. 9341)

Rent Increase Limit (Section 3):
- The rent of any covered residential unit shall not be increased by more than 10% annually as long as the same lessee occupies the unit.
- When the unit becomes vacant, the lessor may set the initial rent for the next lessee.

Definitions (Section 4):
- "Rent" refers to the amount paid for the use or occupancy of a residential unit.
- "Residential unit" includes apartments, houses, boarding houses, dormitories, rooms, and bedspaces offered for rent, except motels, hotels, and units used solely for business purposes.
- "Immediate members of family" are limited to the spouse, direct descendants or ascendants, by consanguinity or affinity.
- "Lessee" is the person renting a residential unit.
- "Owner/Lessor" includes the owner, administrator, or agent of the owner.
- "Sublessor" is the person who rents out a leased residential unit.
- "Sublessee" is the person who rents from a sublessor.

Rent Payment and Deposit (Section 5):
- Rent shall be paid in advance within the first 5 days of every month, unless the contract provides a later date.
- The lessor cannot demand more than 1 month's advance rent and 2 months' deposit.
- The deposit shall be kept in a bank account under the lessor's name, and any interest shall be returned to the lessee at the end of the lease.
- If the lessee fails to pay rent or utility bills, or damages the property, the deposit and interest may be forfeited.

Assignment of Lease or Subleasing (Section 6):
- Assignment of lease or subleasing the whole or any portion of the residential unit, including accepting boarders or bedspacers, without the written consent of the owner/lessor is prohibited.

Grounds for Judicial Ejectment (Section 7):
- Assignment of lease or subleasing without the owner's written consent (Section 7a).
- Arrears in rent payment for a total of 3 months, with provisions for consignation of rent (Section 7b).
- Legitimate need of the owner to repossess the property for their own use or for an immediate family member's use, with 3 months' notice and prohibition on leasing the unit for 1 year after repossession (Section 7c).
- Need of the lessor to make necessary repairs, with the lessee having first preference to lease the unit after repairs, and the new rent being commensurate with the repair expenses (Section 7d).
- Expiration of the lease contract (Section 7e).

Prohibition Against Ejectment by Reason of Sale or Mortgage (Section 8):
- No lessor or successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises have been sold or mortgaged.

Rent-to-Own Scheme (Section 9):
- At the option of the lessor, they may engage the lessee in a written rent-to-own agreement that will result in the transfer of ownership of the dwelling to the lessee.
- Such agreements are exempt from the rent increase limit in Section 3.

Application of Civil Code and Rules of Court (Section 10):
- Except for leases with a definite period, the provisions of Article 1673 of the Civil Code regarding residential units are suspended during the effectivity of this Act.
- Other provisions of the Civil Code and Rules of Court on lease contracts shall apply if not in conflict with this Act.

Coverage of the Act (Section 11):
- Covers all residential units in the National Capital Region and other highly urbanized cities with a total monthly rent not exceeding ₱10,000 as of the effectivity date.
- Covers all residential units in all other areas with a total monthly rent not exceeding ₱5,000 as of the effectivity date.
- Existing contracts are not prejudiced.

Penalties (Section 12):
- A fine of ₱5,000 to ₱15,000 or imprisonment of 1 month and 1 day to 6 months, or both, shall be imposed for violating any provision of this Act.

Information Drive (Section 13):
- The Department of the Interior and Local Government and the Housing and Urban Development Coordinating Council shall conduct a continuing information drive about the provisions of this Act.

Transitory Provision (Section 14):
- The Housing and Urban Development Coordinating Council and its attached housing agencies shall formulate a transition program within 6 months from the effectivity date, to provide safety measures to cushion the impact of a free rent market.

Separability Clause (Section 15):
- If any provision is held invalid or unconstitutional, the remainder of the law shall remain valid and subsisting.

Repealing Clause (Section 16):
- Any law, presidential decree, executive order, or regulation contrary to or inconsistent with this Act is hereby repealed, modified, or amended accordingly.

Effectivity Clause (Section 17):
- This Act shall take effect 15 days after its complete publication in at least two newspapers of general circulation until December 31, 2008.